Austrian Company Formation

Legal form: Austrian commercial law offers a variety of incorporated and unincorporated forms of business. The most common forms in which a foreign enterprise may operate in Austria are the Limited Liability Company (Gesellschaft mit beschränkter Haftung ('GesmbH' or 'GmbH')) and the Stock Corporation (Aktiengesellschaft ('AG')). The Gesellschaft mit beschränkter Haftung (GmbH) is a separate legal entity that essentially limits the responsibility of the shareholders to the amount of share capital (capital stock or common equity) owned. Unless it is intended to raise funds on the Austrian stock market, the GmbH will be the most convenient form of organization owing to the relative flexibility it offers. Most foreign-owned businesses in Austria are operating in that legal form.

Name of the company: The name of the company must be in Latin characters and must end with GmbH to denote limited liability.

Memorandum and Articles of Association: It is necessary to adopt Articles of Associates when founding a GmbH. The company becomes a legal entity when it is formally entered in the business register (Firmenbuch) kept by the commercial court (Handelsgericht) having local jurisdiction. The articles of association must be adopted in the form of a notarial deed (Notariatsakt). Single ownership of share interests (a one-man-company) is permitted. Austrian law permits signing by proxy, if the proxy holds a written special power of attorney (Spezialvollmacht). By law, the articles of associates must contain at least: the corporate name and seat (registered office) of the company, the objects of the business, the amount of share capital (Stammkapital) and share interests (Stammeinlagen) of the shareholders.

Costs involved in founding a company: A capital transfer tax (Gesellschaftssteuer) equivalent to 1% of the share capital (Stammkapital) must be paid for setting-up the GmbH. In addition the commercial court charges a fee, when entering the new GmbH in the business register. Additional costs are incurred for legal services, production of the notarial deed (Notariatsakt) and publication of the GmbH-registration. Costs incurred in founding a GmbH are deductible up to the amount expressly stipulated for this purpose in the articles of associates.

Shareholders: A GmbH has to be formed by one or more persons who may be individuals or legal entities, resident or non-resident, Austrian or foreign citizens.

The share capital: The minimum share capital of a GmbH is EUR 35.000. This must be subscribed in full on formation of the company, but only the higher of either EUR 17.500 or 25% of the total share capital must be paid in before registration. The law does not provide for the issue of share certificates; shares in a GmbH cannot be traded on the stock exchange. Accordingly, a valid transfer of the ownership of shares is only possible by means of an assignment before a notary public.

Directors of the company: A GmbH can have one or more managing directors. The authority of a managing director is established in the articles of associates, by means of his appointment by the shareholders or – in the absence of this method – according to the law. Managing Directors have complete authority to represent the company to the outside (as established by the conditions of their authority). The authority of a managing directors is not tied to Austrian citizenship. At least one business manager should, however, have his usual place of residence in Austria. Supervisory board (board of directors) is required only under specific circumstances, for example when a GmbH has more than 300 employees.

Registered office: All Austrian companies must have their registered office in Austria.

Taxation: Corporate profits are subject to a corporate income tax (Körperschaftssteuer) at a rate of 25 per cent since 1.1.2005. The income tax rate on dividends paid by corporations to their individual shareholders is 25 per cent without any further income tax being levied. Municipal tax is levied on all entrepreneurs who have employees; the rate is 3 per cent of the payroll. Similar to the municipal tax, there is an obligatory contribution to the child allowance fund in the amount of 4.5 per cent of the payroll.

Audit and financial returns: Financial statements (Jahresabschluss) must be provided annually and must disclose all assets, provisions, liabilities, prepayments, income and expenses. They must give a "true and fair" view of a company's assets, its financial condition and earnings. A statutory audit is required for: banks, insurance companies and investment funds, every AG (equivalent to a public limited company), "large" and "medium-size" GmbHs (equivalent to a private limited company) or GmbH & Co KGs (partnership where the fully liable partner is a GmbH, ie no physical person is fully liable) and "small" GmbHs with a mandatory supervisory board. GmbHs and AGs have to submit their (possibly abbreviated) annual reports to the Commercial Register (Firmenbuch). In addition, large AGs, banks, insurance companies and investment funds must have an abbreviated version of the annual report published in the Amtsblatt zur Wiener Zeitung, an offical insert in the Wiener Zeitung newspaper. Partnerships (except GmbH & Co KGs) do not even have to submit their financial statements to the commercial register.

Meetings: A general meeting of shareholders must be held at least once a year (ordinary meeting). In addition to the cases expressly referred to in the law or the articles, it shall be called whenever required in the interest of the company. In particular, it shall be called without delay after it has been ascertained that one half of the stated capital has been lost. The meeting shall be held at the registered domicile of the company unless the articles determine otherwise.

Time needed for Austria company formation: Usually it is 7-14 working days.